For a number of years, young Americans have been talking more and more about the probability of Social Security just not being there when we hit retirement age. Some people mistakenly believe that the deductions we pay are like making deposits into a bank account, earning interest, and one simply makes withdrawals after age 65. Oops, they raised that to 67, didn’t they? That change was one of the few results of several highly visible blue ribbon political panels over the last 20 years, by the way.
Of course Social Security is not like a bank account: what gets deducted from a paycheck goes out to the people who draw SSA checks today. Whatever’s left goes to buy US Government bonds. The money gotten from those bonds goes out the door today to finance, for example, the War on Terrorism and paying Halliburton to rebuild Iraq. Demographics show that in the future, we just won’t have enough working people to pay the benefits today’s workers are accruing.
Now Europe, especially the Western nations that weren’t part of the Soviet Bloc, is facing the same mess and a lot of people there don’t like it. There are strikes and political rebellions. And for all the trucks they block and the signs they carry and the governments they vote down, the demographics aren’t going to change. (Okay, they could start having a lot more babies ASAP but since the unemployment problem is way worse in Europe than in the US–bad as it is here–I don’t see that as being much help.)
Bottom line, best as I see it: There will be a lot of angry people looking for money to live on when they get older, unless the governments really spin up the printing presses to push the problem to the next generation. Chirac, Bush, Cheney, Blair et al and whoever, they better think about how to deal with this dilemma and I have one hint for them: privatization is not the answer.
BillSaysThis 